One of my client recently got an interesting message about offer to invest in insurance plan and he forward the same message to me. When I looked at it, it looks like amazing plan to me. I will share that message with you all, except the contact number they provided.
BAJAJ UGADI OFFER
INVEST Rs.25000/YR FOR 5 YRS & GET GUARANTEED RETURNS UP TO 40% P.A+2GRM GOLD COIN+LIFE COVERAGE+TAX BENEFITS. PH-……………….
After receiving this message, I called to the number they provided in message and informed to the person that one of my client got this message and want more clarify on that plan. I provided my mail id to send the details as per his request. But after waiting for few more days too, I didnt get the mails.
So eager to know about the plan, i called once again the same number. To my amaze it looks totally a mis-selling activity which he is doing.
During my conversation with him, I come to know about the plan details as below.
1) It is traditional plan. He advised me not to go with ULIPs as risk is more 🙂
2) I need to invest yearly Rs.25,000 for 5 yrs.
3) Bonus rate currently under this plan is 4%
4) Guaranteed Bonus rate as he told to me is 3%, which you will get with yearly bonus what I showed in (3).
5) After that he told, I will get SA of Rs.1,25,000.
5) When we both calculated over phone, accumulated bonus as per 4% per year is-Rs.5,000 yly+ Guaranteed Bonus at 3% is Rs.3,750. So overall you can expect bonus from this plan is-Rs.10,000 to the maximum.
6) So after five years, I will get Rs.1,25,000+50,000=1,75,000.
8) I asked him why he showed 40% return in message-He told “It is not 40% return, but I will get 40% more on what I invested” understood?? Suppose you invested Rs.1,25,000 for whole 5 years then 40% of this Rs.1,25,000 is Rs.50,000 more. So totally I will get Rs.1,75,000. So return on my investment is not 40%.
When we look at the above illustration actual return on your investment is 11% IRR reason is, exaggerated bonus rates which he told during conversation. So point to remember is-Beware about each word what your advisers explains before purchasing.
9) Then I asked about the 2 grm Gold Coin-He suddenly started to speak in high volume about the reason for that is-to grab the business. When i reminded about the breaking of IRDA rule (regarding sharing of commission), he became a bit soft and told about the competitors who are eagerly ready to sell the product by sharing the commission (he named LIC agents mainly :)).
Finally I told him, dont behave like politicians who blame each other rather than being loyal to people.
So lesson investors can learn from this is, beware about exaggerated illustrations and ask 100 questions before investing in any product, do your own research and try to find the meaning of each new word your adviser bring forth to you.
My sincere request to my agents and advisers fraternity is-Dont show the exaggerated data to grab the business. Also dont follow the bad practice of sharing the commission. Because commission is value you are getting for the service you provided.
(Note-I retained the message which I got from my client for future reference)